Entitled “Making the most of devolution”, it calls for “Enterprise Zone status and tax-varying powers to make the region more attractive to overseas investors."
It builds on the report earlier this year by the Independent Review of Economic Policy (IREP), which also recommended differential rates of corporation tax in Northern Ireland, a move which is being considered by George Osborne.
What is relevant to Wales is the call, by PwC chief economist Dr Esmond Birnie, for Northern Ireland “to work with their Scottish and Welsh counterparts to exploit every advantage to make devolution real”.
This follows a similar call by Gerry Holtham and his recent review that:
“The Assembly Government should seek discussions with the UK Government and the other devolved administrations about the feasibility of devolving corporation tax. Any specific proposal will need evaluation to ensure its compatibility with European law, notably the question of whether any UK-wide agreement on limits to rate changes would be permissible.”
Given that the current state of indirect business support seems to be in a complete mess, the question is whether WAG has started any discussion, with either the other devolved regions or the UK Government itself, about improving the environment for direct support to businesses in Wales via lower business taxes.
In my opinion, that discussion cannot start soon enough.
Comments
I honestly don't know but the fact is that there needs to be a discussion or debate on this matter as it is an enormous "elephant in the room" when it comes to economic development. In fact, the proposal from Gerry Holtham is that a case could be made for reduced corporation tax which is linked to relative GVA, which would mean that the poorer English regions - such as North East of England - could also benefit from such a development.
If not different rates of taxation, then what is the alternative to regional economic convergence across the UK, which the coalition government has stated that it wants to address?
Varying rates of corporation tax across sectors could be another way to achieve this. For example, you could examine a lower level of corporation tax for manufacturing, as happened in Ireland during the `1980s, although I can imagine the State Aid experts having kittens over such a move.
Certainly, every other measure to close the prosperity gap between the 'have' regions and 'have not' regions has failed over the last decade, so why not explore a range of options, including different rates of corporation tax, to achieve this.
If the Irish Government goes ahead most of the arguments left to devolve the Tax powers are political rather than economic and its much harder to prove the case even with excellent report like the one from PriceWaterHouse Coopers.
Given the current state of play in the Assembly do we really want to give them more power?